The Union Cabinet chaired by Prime Minister Shri Narendra Modi has approved establishment of additional 6.5 Million Metric Tonne (MMT) Strategic Petroleum Reserve (SPR) facilities at two locations, i.e. Chandikhol in Odisha and Padur in Karnataka, including construction of dedicated SPMs (Single Point Mooring) for the two SPRs. The SPR facilities at Chandikhol and Padur will be underground rock caverns and will have capacities of 4 MMT and 2.5 MMT respectively. The government had announced setting up of two additional SPRs during the budget announcement for 2017-18.

The in-principle approval is to take up the project under PPP model to reduce budgetary support of Government of India. The terms and conditions of such participation would be determined by M/oP&NG in consultation with Ministry of Finance after conducting road shows to elicit requirements of the market, including prospective investors.

ISPRL has already constructed underground rock caverns for storage of 5.33MMT of crude oil at three locations, viz. Vishakhapatnam (1.33 MMT), Mangalore (1.5 MMT) and Padur (2.5 MMT). The total 5.33 MMT capacity under Phase-I of the SPR programme is currently estimated to supply approximately 10 days of India’s crude requirement according to the consumption data for FY2016-17. Cabinet’s approval for establishing additional 6.5 MMT Strategic Petroleum Reserve facilities will provide an additional supply of about 12 days and is expected to augment India’s energy security.

About SPR programme:

To ensure energy security, the Government of India had decided to set up 5 million metric tons (MMT) of strategic crude oil storages at three locations namely, Visakhapatnam, Mangalore, and Padur (near Udupi). These strategic storages would be in addition to the existing storages of crude oil and petroleum products with the oil companies and would serve as a cushion during any external supply disruptions.

In the 2017-18 budget, it was announced that two more such caverns will be set up Chandikhole in Jajpur district of Odisha and Bikaner in Rajasthan as part of the second phase.

The construction of the Strategic Crude Oil Storage facilities is being managed by Indian Strategic Petroleum Reserves Limited (ISPRL), a Special Purpose Vehicle, which is a wholly owned subsidiary of Oil Industry Development Board (OIDB) under the Ministry of Petroleum & Natural Gas.

In 1990, as the Gulf war engulfed West Asia, India was in the throes of a major energy crisis. By all accounts, India’s oil reserves at the time were adequate for only three days. While India managed to avert the crisis then, the threat of energy disruption continues to present a real danger even today.

It is unlikely that India’s energy needs will dramatically move away from fossil fuels in the near future. Over 80% of these fuels come from imports, a majority of which is sourced from West Asia. This is a major strategic risk and poses a massive financial drain for an embattled economy and its growing current account deficit.

To address energy insecurity, the Atal Bihari Vajpayee government mooted the concept of strategic petroleum reserves in 1998. Today, with India consuming upwards of four million barrels of crude every day (January 2015 figures), the case for creating such reserves grows stronger.